Riding on the back of Prime Minister Narendra Modi’s ‘Make In India’ initiative, Amazon India has reiterated its push for a hybrid ecommerce model – one that will allow the online retailer to stock inventory as well as run a marketplace for small merchants. This move is already being opposed by local rivals including Flipkart and Snapdeal.
Two sources aware of the development, stated that Amazon had met with policy-makers last month in Delhi and once again insisted on the new model, which according to them has the potential to make PM Modi’s ‘Make In India’ programme a success – in an ET post.
Snapdeal and Flipkart have both released statements to ET refuting the need for a new model, in India’s emerging economy.
“The current policy that’s in place is well thought-out and suits a developing economy like India. It also provides ample growth opportunities for emerging businesses and benefits thousands of small manufacturers and sellers across the country,” said a Flipkart spokesperson in an emailed response.
On the other hand, Delhi-based Snapdeal, which has recently invested $300 Mn in rebranding and re-communication with a new logo, talked about an ‘inherent conflict of interest’ when it comes to the hybrid model. A spokesperson claimed in an email that this move will create “unfettered access to cheap imports, through the inventory route, will deny local manufacturers the opportunity to benefit from India’s huge domestic market” and “will work against the success of key initiatives like Make in India, which seek to boost local manufacturing.”
Arguing for the need to increase Make In India among SMBs, Amit Agarwal, Country Head for Amazon India said, “If we are really serious about Make-In-India, then a hybrid model allows Amazon to bring in and buy products from these disadvantaged small and medium manufacturers like we do globally…(It) will increase the selection on the platform, which will bring in more traffic and allow sellers to become larger and manufacturers to grow.”
Sources who are aware of the development have stated that this move will be especially advantageous to the Seattle-based company. As it stands, FDI norms prohibit foreign companies from selling directly to online and offline Indian customers and hold inventory. It is for this reason that Flipkart, Snapdeal, and Amazon have third-party vendors selling to the customers and claim to hold no physical inventory of their own.
Policy changes in March 2016 further dictated that no single seller can account for more than 25% sales of the total sales on a platform. And, complying with this regulation, Amazon India shut down the selling of smartphones on Cloudtail Pvt. Ltd, its biggest vendor for electronic consumer goods, specifically mobiles. Flipkart-owned Myntra is working with a new seller for the same reason.
Online horizontal retailer Shopclues too weighed in on the matter. “Indian startups don’t need protection from government,” said Sanjay Sethi, CEO, Shopclues. “Regulations should be straightforward, they should be well understood and everybody should comply by laws in letter and spirit,” he added.
The ongoing festive season has contributed to a war of attrition among the ecommerce players. With Flipkart taking on Amazon and Snapdeal Tinder-style with a gimmicky GIF, to Amazon India debunking Flipkart’s metrics regarding its Big Billion Day sales.
The Jeff Bezos-owned company has invested $3 Bn in its India arm, to stake out its claim of the ecommerce market pie. It has already fuelled its wholesale arm AmazonBusiness with $17 Mn in order to take on the B2B ecommerce vertical.
The government, for its part, has instituted recent policy changes to address consumer complaints in the ecommerce sector with the launch of a grievance cell, among other things. The government has also set up a committee under NITI Aayog’s Amitabh Kant to look into matters regarding taxation, ecommerce, and issues of sellers, wherein he met with industry stakeholders to discuss the same in August 2016.
When asked to comment on the push for a hybrid model, Kant declined.
